British troops in Iraq and Afghanistan are likely to face further legal action after the House of Lords ruled yesterday that the Human Rights Act does apply to soldiers operating in war zones abroad.

The ruling could open the way for civilian victims of military actions to sue the Ministry of Defence for millions of pounds. In a test case, the panel of Law Lords decided by four to one that the legislation applied to the death of hotel receptionist Baha Mousa while in British custody in Iraq.

His relatives won their claim that the Human Rights Act entitles them to a possible independent investigation into his death.

However, the law lords' ruling means that British troops fighting terrorists in Afghanistan and Iraq will be forced to operate under even greater pressure and scrutiny.

The military reaction was one of frustration. "I don't think we need any more lawyers judging a military situation that they can't possibly understand," a senior military officer said:

The Government had argued that the family of Mr Mousa, 26, should take their case to the European Court of Human Rights at Strasbourg instead of the English courts.

But Lord Rodger, in a 60-page ruling, said that to read the Human Rights Act in that way would defeat its central purpose.

The High Court will now be asked to decide whether the recent court martial of seven British soldiers was sufficient to satisfy the Government's obligations, or whether there needs to be a full public inquiry.

The soldiers, including Col Jorge Mendonca, were acquitted of all the charges that they denied.

The law lords, however, dismissed appeals in the cases of five other Iraqi civilians who were shot in British-occupied Basra.

Phil Shiner, the solicitor acting for Mr Mousa's father, Col Daoud Mousa, and for other Iraqis alleging abuse and torture, said: "This is a massive breakthrough in my clients' efforts to secure accountability for deaths and torture in detention."

In an open letter to Col Mendonca, Col Mousa, a policeman, wrote that he hoped the officer and his men would "accept responsibility for the heinous crime committed".

"The British Army is a great army but there are some people within it who are outlaws and bad," he wrote.

"I agree with your wife [in a newspaper article] that the court martial was a farce. The court sympathised with the criminals. How can there be a fair trial when the Ministry of Defence investigates, prosecutes and judges itself?"

Shami Chakrabarti, director of the campaign group Liberty, said there must be a full independent inquiry.

"There could now never be a British Guantanamo," she said. "The British will never be able to build a prison anywhere in the world and say it is a legal black hole."

In each case, relatives of the six had challenged the Defence Secretary's refusal to order an independent inquiry into the circumstances of the deaths.

To succeed, each had to prove that a public authority had acted in a way that was incompatible with the Convention.

The Ministry of Defence insisted that the ruling essentially "changes nothing" as British forces are aware they always have to act lawfully but it provided "helpful clarification".

A military police investigation was continuing into the Mousa case because the hotel worker "died after being held in UK custody and was subject to an unlawful conditioning process". "We have never argued that the treatment of Baha Mousa was acceptable or that his death should not have been investigated," the MoD said.

The Mousa case was "very much an aberration" as individuals in custody "don't routinely turn up dead with 93 wounds on their body".

"Our position is that we have thoroughly investigated the death and its circumstances," a MoD source said.

A board of inquiry is expected to report in the Mousa case later this year.